The Covid-19 crisis has created a perfect storm for global M&A:

• Earnings are falling precipitously. Acquirers are calling off deals by invoking Material Adverse Change (MAC) clauses. Many transactions have either broken or widened out to spreads of 30% to 70%.
• Even less-risky deals are seeing much wider spreads due to forced de-leveraging. For example, we saw annualised returns in Japan which have been around 2-3% for months blow out to 40%+ at one point.

The disruption in the M&A space has been more severe than during the GFC, as this time the correction has been stunningly abrupt. (more…)

We had a productive trip to India this month, meeting the management and directors of our portfolio companies, their operating subsidiaries, sell-side analysts, journalists and investors.

A frequent topic of conversation was the upcoming abolition of Dividend Distribution Tax (DDT), which is significant for holding companies. (more…)

Relative value is a strategy that has, over the years that we have followed it starting in 2007, generally performed well and has produced returns uncorrelated with other strategies and with the broader market. However in last two years the strategy has started to perform poorly for investors. What is the cause?

The figure below shows is an 18-year chart of the MSCI AC Asia ex-Japan Growth and Value indices. Growth tracked Value very closely over the entire period up to 2017. Since then, Growth has significantly outperformed.

Why is this? (more…)